Super for Home Deposits – Craig Kelly MP

Craig Kelly the Liberal Member for Hughes talks to Ross about why he supports first home buyers accessing superannuation to pay for a home deposit

Super for Home Deposits

Introduction

Ross: Let’s start the program. Talk about the political battles in regards to where we go to make housing more affordable. My view as you’ve heard many, many times is that if you wait long enough, the prices will come down because already you’re starting to see the appetite for investment lending as a result of some of the regulatory changes start to come off. If the appetite for investors comes off as a result of more strict lending policies from the lenders, or alternatively, just simply because the prices go too high and therefore ultimately reach the limits of people’s ability to pay the prices, then the price will naturally come off.

We really are only talking to marketing. We’re talking Melbourne and Sydney, Cambridge to a certain extent as well, Brisbane not so much, Adelaide is affordable, Perth is the most affordable state capital in this country right now, Hobart not far behind. So should first-time buyers be given a chance as a part of the government’s budget policy, which quite clearly you’ve seen Scott Morrison saying that this is the corner point of the federal budget this year.

Is it really smart to have people dip into their future savings, as superannuation, to afford their first time? Let’s go to Craig Kelly, the Liberal MP for Hughes, who’s got a very strong view on this, and Craig, I appreciate your time on the program this evening.

Interview

Craig Kelly: Good evening, Ross.

Ross: Tell me, is it reasonable to suggest an Australian, a young Australian should be given access to this super to buy their first time?

Craig: A couple of things, Ross, because you have to remember that superannuation is your money. It doesn’t belong to the government. It doesn’t belong to the industry funds. It belongs to the individual worker who earned that money. Under the current rule, everyone has to put, whether young or old, you’ve got to put 9.5% the minimum, of your salary into compulsory superannuation.

Ross: Okay, I’ll pick you up there. It’s my money, but you direct me to put 9.5% of my pay into that. If you didn’t direct me to put 9.5% of my pay into superannuation, I could more easily afford a home.

Craig: Correct, absolutely. That’s the whole thing, Ross. It’s becoming more and more difficult for younger people, first-time buyers, to afford that deposit. Why not allow them to make the investment, use a part of their superannuation money to invest in a deposit in their house, and that fund there can also sit in a combined superannuation account, or be count as superannuation savings-

Ross: Can I give you one reason why maybe that’s not such a good idea? The reason for it is because a bank, if I go broke, say for example, I get divorced or I lose my job or something like that, and I can’t repay the mortgage, and there’s a lot of other unemployment and house prices go down, and I’ve got negative equity, the one thing that a bank can’t touch when I go into bankruptcy is that they can’t touch my super. So, how’s the bank going to lend me money if they can’t get access to the security that I’ve put up as collateral which is my superannuation fund?

Mortgage Insurance help?

Craig: Ross, at the moment, remember there’s mortgage insurance. If you don’t have a 20% deposit, you are slugged with the extra cost of mortgage insurance. Surely, there’s some way the banks could do that if they think they can’t get access to that 10% or whatever it is that is someone’s deposit, it can be covered by mortgage insurance.

Ross: But then that means I’ve got to go to Genworth or I’ve got to LMI Insurance and see whether they are prepared to accept the risk, that if I go broke and the bank can’t access my deposit, in other words my superannuation, then it’s going to be on those mortgage insurers to actually foot the bill. I’m not sure they are going to be so happy, or alternatively, the premiums, a bit like flood insurance, is going to be prohibitively high.

Craig: Well, Ross, that happens at the moment. If you don’t have a 20% deposit put down on the house you buy, you are slugged with mortgage insurance. Those I’ve got one quick example. You’re buying an $800,000 property, and you want to borrow $700,000. You have a $100,000 deposit. You’ve still got to come up with 11 grand in mortgage insurance.

Ross, also, my generation, I’m 53, when I first started to work, there was no compulsory superannuation, but I was able to put 10% of my salary aside and decided I put that into an account to save up for a deposit on a house. This generation, today’s younger generation, first-time buyers, we are denying them that opportunity. I think that is unfair and this has to be also part of it.

It’s not just one thing by itself. We also have to make sure we address the issues of supply. We’ve got to get more supply into the market but I don’t think it’s fair that we have in this generation that you have to put 10% of your money compulsory in super, you can’t use it as a deposit perhaps, and we wonder why having ownership is poor in this country.

Superannuation is My Money

Ross: You said that superannuation is my money and agree with that. I have a responsibility for that money, but it would be fair to say that the government has a significant amount of legislation around superannuation. My problem is I’m not 100% certain that I trust government with superannuation policy not to down the track that I can’t get access to a lump sum of cash, that you would force me into some form of income stream in retirement so that I can’t get access to the cash and pay off my mortgage. I’m worried about that I’ll tell you.

Craig: Ross, remember at the moment, when you retire, when you hit 65, you could rent all your life, put your money into super, and when you hit 65, you can put your hands on your super and then you can go and buy a house. Superannuation money can be used to buy a house, but you’ve got to wait until you’re 65. How unfair is that for someone in their 30s that’s being prevented from getting in the market because they simply cannot afford a deposit?

And Ross, long-term that’s been shown, the best form of savings in this country has been home ownership. If you go into retirement and you do not own your own home, Ross, that is where you are vulnerable to cost of living increases, and that’s where you really strike financial difficulty. Someone that owns their own home in this country, when they go into retirement, at least they’ve got their nest egg to rely on.

Ross: I’ll tell you what, Craig Kelly, great to have you on the program. It’s a very strong view, and there’s no doubt this is all coming down to the point of when should you get access to your money? When you’re into retirement, which is exactly what the compulsory superannuation system was created for, or when you are earlier in your working life and as a result of that be able to maybe afford a home more early than what many Australians can right now? Craig Kelly, Liberal Member for Hughes, we appreciate your time on the program.

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About The Author

Ross Greenwood is the Nine Network’s business and finance editor, and hosts Sydney's top-rating radio program, Money News, for 2GB, 4BC. 3AW and all networked stations across the Macquarie Media group.
He appears daily on the Today Show - notably for his Money Minute - and Nine News.